The peso on Thursday fell to a 12-year low against the US dollar on high corporate demand for the US dollar and widening trade deficit.
The peso lost eight centavos to close at 52.55 a greenback Thursday, down from 52.47 on May 23. It was its weakest level in almost 12 years, or since it settled at 52.745 on July 19, 2006.
Total volume traded reached $899.95 million Thursday, up from $529.9 million Wednesday.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. remained unworried despite the peso’s decline, saying it was natural for the currency to move up and down.
“That is market… It goes up and down. What can I say,” Espenilla said in reply to a query. He said that he was not worried on the current level of the peso.
ING Bank Manila senior economist Joey Cuyegkeng said the high oil prices were pulling down the peso.
“Net oil importing economies like the Philippines are affected and partly seen in PHP [Philippine peso],” Cuyegkeng said. He said the Philippines returned to a situation of twin deficits”•fiscal and current account.
He said both deficits were “seen to widen from last year to level not seen in the recent past.
“But these deficits are manageable in our view. But with market risk sentiment low such manageable deficits add to overall emerging markets’ risks,” he said.
Cuyegkeng said the drop in remittances in March contributed to the underlying weakness of the peso. Remittances declined 9.8 percent in March from a year earlier.
“The recent bout of PHP weakness is a combination of this shortfall, low emerging market risk appetite, the market’s dovish take of the central bank’s policy rate hike and higher oil prices,” Cuyegkeng said.
He said the reduction in reserve requirement ratio of banks from 19 percent to 18 percent would free up more liquidity into the market and pull down the value of the local currency against the US dollar.
Australia and New Zealand Banking Group Ltd. said it was expecting the peso to end the year at 53.50 a dollar.
The country’s external position weakened in 2017, with the current account deficit hitting $2.5 billion.
The Bangko Sentral said it was expecting the current account to register a deficit of $700 million this year.
